Redwood Materials wins $2B DOE loan to recycle EV batteries

The U.S. will need millions of tons of metals and materials to build the batteries going into electric vehicles. The Biden administration wants as much of that material as possible to be produced domestically — and as much as possible to come from recycling old batteries instead of being mined from the earth.

On Thursday, the U.S. Department of Energy’s Loan Programs Office announced a conditional loan commitment of $2 billion for Redwood Materials, the battery materials and recycling startup led by Tesla co-founder and former CTO JB Straubel, aimed at boosting that domestic recycled battery materials supply.

The loan will help Redwood Materials build its $3.5 billion McCarren, Nevada factory, which is expected to eventually be the first ​“fully closed-loop lithium-ion battery manufacturing process” in the country, according to Thursday’s statement. The $2 billion will become available in tranches to support the factory’s expansion; it will be subject to final approval and milestones being met by the company.

The Nevada factory will produce anode copper foil and cathode active materials, two key ingredients of lithium-ion batteries, from a combination of raw materials, scrap from sources including the nearby Tesla battery Gigafactory in Reno, and end-of-life batteries shipped in from across the country. At full capacity, Redwood plans to produce enough of these materials to supply battery production for more than 1 million EVs per year.

Almost all lithium-ion anode and cathode materials today are made in Asia, mostly in China. The Biden administration has made securing domestic supplies of batteries and their materials a priority. Last year’s Inflation Reduction Act directs tens of billions of dollars to ramp up U.S. production of batteries, battery components and critical minerals.

Recycling could meet an expanding share of the demand for battery materials in the coming years as the number of EVs on the road increases. That could reduce not only the cost and uncertainty of securing supplies of these materials from overseas, but also the need for mining and processing raw minerals and the attendant environmental harms associated with their extraction.

“Recycling will play an increasingly important role in battery materials production,” Jigar Shah, head of DOE’s Loan Programs Office, said in a Thursday email. ​“By lowering the cost of the critical materials necessary to produce lithium-ion batteries using recycled materials, electric vehicles have the potential to become more affordable and accessible for consumers.”

Redwood Materials has raised just under $800 million from venture investors to date. In December it announced plans to invest another $3.5 billion in a second recycling and manufacturing facility in South Carolina. It is currently recycling batteries from Panasonic, Ford, Toyota, Nissan and other companies and has supply agreements with companies including Panasonic, Ford, Toyota Motor and Volkswagen Group.

Redwood Materials is among the most heavily funded of a number of companies seeking to build a domestic recycling industry for batteries and other clean energy technologies. Some of the contenders include the American Battery Technology Company, Ascend Elements, Li-Cycle​and Nth Cycle.

The conditional commitment for Redwood Materials is from the Advanced Technology Vehicles Manufacturing loan program, which loaned about $8 billion to Ford, Nissan and Tesla between 2007 and 2010 and has been revived under the Biden administration. In the past year, ATVM has awarded loans including $2.5 billion to Ultium Cells, the battery joint venture of General Motors and LG Energy Solution, $750 million to the Rhyolite Ridge lithium and boron mining project in Nevada and $107 million to a Louisiana facility producing graphite anode material for batteries.